Salient

The Price of Beer

By Neil Miller | 5 May, 2008

There is a clear and present danger that, in very near future, beer prices are going to rise higher than the waistline of Stephen Fleming’s pants on that terrible advert for heat pumps.

Forget student debt, global warming or even President Joel’s missing hat – the impending beer crisis is the single biggest issue facing Vic students this year.

Every ounce of my being wants to deny this looming tragedy. However, if I said that beer was going to get cheaper I would move instantly to number two on the “Big New Zealand Lie List” (right behind Hon Parekura Horomia’s assertion that many kids go to school hungry because they are dieting).

Globally, two of the main ingredients in beer – barley and hops – are in short supply and prices are skyrocketing. The hops harvest has been hit by drought, disease and even fire. Despite paying an average of 20% more, many breweries are still unable to source enough hops.

Malted barley is the fundamental building block for beer. Production has been lower than expected this year with many farmers pulling out barley and replanting the land with crops which attract government bio-fuel subsidies. This is surely an unintended consequence of environmentalism. Overall, malt prices are up 30%. Additionally, fuel costs are also through the roof.

Simple economics dictates that such massive cost increases will inevitably have to be passed onto the consumer – John and Joanne Six-Pack. To their credit, most breweries have resisted so far but, as the maxim has it, the centre cannot hold.

These cost pressures disproportionately hit craft and boutique brewers. They use more real ingredients in their beer and, because of their smaller size, lack any significant economies of scale. Lion and DB have signaled price increases this year though their cost pressures have been conflated by a deliberate price war.

New Zealand’s situation is perhaps not as bad as Britain where the newly unpopular Gordon Brown is looking to crack down on supermarkets selling alcohol as “loss-leaders” (effectively below cost). Similarly, the still popular Kevin Rudd has just doubled the tax on premixed alcoholic drinks which has resulted in an overnight price rise of between 30c and $1.30 a bottle for Australian RTDs.

With the possible exception of Amy Winehouse, nothing on earth will actually get higher than Flem’s trousers but sadly imbibers will soon have to pay more for beer.